Industrial Growth in India During Five Year Plans

First Five Year Pan

On the eye of the First Five Year Plan, the Industrial Development in India was confined largely to the consumer goods sector, the important Industries being Cotton Textile, Sugar, Salt, Soap, ‘Leather goods and Paper. Thus the Industrial Structure exhibited the features, of an underdeveloped economy. Industries manufacturing “Intermediate products” like Coal, Cement, Steel, Power, Alcohol, Non-ferrous metals, ‘ Chemicals etc., were also established but their production was small as productive capacity was considerably below the requirements , (except cement). As far as the capital goods sector is concerned, only a small beginning had made. On the whole, while consumer goods industries were well established, producer goods industries lagged considerably behind.

The goal on the Industrial front was to make better utilisation of existing capacity and to go in for some renovation and modernisation. With an overall increase of 38% in industrial production, during 1st plan, the following industries were set up in the public sector – Sindri Fertiliser Factory, Chittaranjan Locomotive Work and Integral Coach Factory.

Second Five Year Plan

The Second Five Year Plan accorded top priority to programme of Industrialisation .Based on the Mahalanobis model, the 2nd plan emphasised the setting up of Basic and Heavy Industries so as to establish a strong base for rapid industrialisation, self-reliance, technological development. As per the Industrial Policy Resolution of 1956, Public Sector Steel Plants were established at Rourkela in Odisha, Bhilai in MP and Durgapur in West Bengal. The investment in the public sector was Rs. 870 crores. The Industrial Production Index rose from 139 in 1955-56 to 194 in 1960-61. Almost all the plants which were established in the plan were established in backward areas.

Third Five Year Plan

The third plan saw the beginning of long term perspective planning as an instalment to achieve the objective of an ‘Integrated Growth of Industry and Agriculture’. The basic strategy was the development of public sector and heavy industries so as to attain a self sustaining growth.

The Second and Third Plans placed great emphasis on building up the capital goods industries and basic industries. As a result the ‘Industrial Structure’ built up over these plans was heavily biased in favour of these industries.

Three Annual Plans (1966-69)

In view of the severe drought conditions during 1966-68 there was a great setback to the economic and industrial development of the nation. Over and above severe short falls in the planned production during the ‘Third Plan forced the Government of India to postpone the formulation and implementation of the Fourth Five Year Plan and to adopt Annual Plans.

Fourth Five Year Plan (1969-74)

In the Fourth Plan, as against the planned increase of 8% in industrial production per annum, actual rate achieved was only around 5% per annum. Nearly 75% of the total investment was in the core sector, viz., Iron and Steel, Non-Ferrous. metals, Fertilisers, Petrochemicals, Coal and Iron Ore etc. There were widespread shortage of power and Agricultural Raw Materials for Industry.

Industrial production during this plan increased only by 4% per annum against the target of 8-10% per annum .Sluggishness of demand, shortage of basic inputs, labour unrest and low capacity utilisation were mainly responsible for poor performance of the industrial sector during this plan.

Fifth Five Year Plan (1974-1979)

The fifth plan focussed on rapid development of the core sector covering steel, machine building, power, coal, petroleum products arid export oriented industries and consumer goods industries ·such as sugar; drugs textiles etc. The industrial growth was slow despite the introduction of several incentives to private sector (delicensing of 21 items). The following were the reasons for slow growth:

  • Imbalances in production of Basic Industrial Inputs
  • Unremunerative prices and
  • Industrial unrest.

The achieved growth rate in the industrial production during the plan was around 5.2% per annum. Thus structure of Industrial development, was promoted and nurtured in the 4th and 5th plans with minor changes here and there.

Sixth Plan (1980-1985)

On the eve of the sixth plan, a stock-taking of the industrial progress over the previous 35 years, showed that the industrial production increased by almost 5 times and Industrial Structure had been widely diversified covering broadly the entire range of consumer, intermediate and capital goods. The plan provided for large outlays for five Industries, viz., Steel, Petroleum, Coal, Fertilisers, Petro Chemicals. However, as in the earlier periods the growth was slow due to transport and power bottlenecks, labour militancy and raw material shortage.

Seventh Plan (1985-1990)

The VIIth plan, with an outlay of Rs. 30,000 crore for the Industrial Sector, re-emphasized the earlier objective of rapid economic growth with social justice. The main features of industrial development during the VIlth Plan, were:

  • Adequate supply of consumer articles for mass consumption at reasonable prices.
  • Development of Industries with large domestic market and also export potential to emerge as World leaders in them; and
  • Integrated development of Industries in general to achieve self reliance and high employment generation.

The average growth rate of Industry in the 7th plan was 8.5% per annum as against the target of 8% per annum. This sizeable growth was due to a number of factors:

  • Improvement in Performance of Infrastructure.
  • Higher Import of Capital Goods,
  • Better utilisation of capacities,
  • Import of Technology, and
  • Broad Branding of Products.

Eighth Five Year Plan (1992-1997)

The main thrust of the 8th plan was directed towards creating a more competitive environment to improve efficiency in production and a review of public sector enterprises to improve efficiency.

In 1991, Industrial trade and Foreign Investment Policies were substantially liberalized. Accordingly 8th plan · gave less importance to ‘quantitative targets. As per the plan, “The desired growth of different sectors will be achieved primarily through modifications in Industrial trade, fiscal policies and changes in duties and taxes rather than through quantitative restrictions on imports/exports or licensing mechanism.”Government of India, Planning Commission, 8th Five Year Plan, 1992-97 (New Delhi, 1992), Vol, II , p.108.

This is clear indication that in the future industrial progress of this country, the private sector is desired to play an increasingly important role. Production contributed by the industrial sector registered an annual average growth rate of S.l % as against the target of 7.5%.

Ninth Plan (1997·2002)

The 9th plan kept a target of 8.2% per annum growth in the Industrial production. But the actual achievement is nowhere near the target. Because of various factors such as lack of domestic demand for intermediate goods, high oil prices, existence of excess capacity in some sectors, Business cycle, Infrastructure constraints particularly Power, Road and Transport and subdued capital market, the Industrial Production could not pick up much. The growth rates for 1997-98, 1999-2000, 2000-01 and 2001-02 were just 6.7%, 6.7%, 5.0% and 2.7% respectively.

2001-02 and 2002-03- The year 2001-02, was characterised by a slowdown in world output. India also witnessed a weak industrial growth of 2.7% during 2001-02, as measured by the UP. The slowdown was broad-based and took place across most industry groups with particularly weak growth of only 1.2% in mining and quarrying.

Tenth Plan (2002-07)

In 10th Plan, there was an acceleration in the industrial growth rate.

Eleventh Plan (2007-12)

During Eleventh Five Year Plan targeted growth of industrial production is set at 10 percent per annum and manufacturing sector growth target is set at 12 percent per annum. However, in the wake of global recession, the government is contemplating a moderation in these rates.

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